Bluerock Ascends to Top Tier of Alternative Investment Sponsors
September 6, 2019 | James Sprow | Blue Vault
Bluerock Capital Markets, LLC (“BCM”) announced on August 12 another record capital raise of over $127 million across all products in the month of July. Through July, BCM’s 2019 sales ranked among the top three of all sponsors in the Direct Investments Industry.
Bluerock’s success at raising equity capital results directly from the pursuit of their goal to make institutional quality investments accessible to individual investors through retail channels. They are succeeding by making transactions easier, improving liquidity, and managing the underlying portfolios to produce increasing value.
Bluerock is a multi-product sponsor, with an umbrella of products that they expect to expand upon in the coming years. There has been great acceptance among RIAs and family offices. Although Bluerock is still doing more business through Independent Broker Dealers, RIAs are the fastest growing channel.
Bluerock is raising large amounts of equity capital across all three of its product lines, which include:
• Bluerock Residential Growth REIT Series B Preferred Stock designed to deliver stability of current income and pricing plus potential capital appreciation with investments in the multifamily sector;
• Bluerock Total Income+ Real Estate Fund (NASDAQ: TIPRX, TIPPX, TIPWX, TIPLX), a non-diversified closed-end interval fund, that provides individual investors with access to private, institutional real estate securities, enabling them to invest alongside large pensions and endowments without the high minimums;
• Bluerock Value Exchange 1031 like-kind exchanges that seeks to provide investors with tax deferral, current income and potential capital appreciation.
Bluerock Residential Growth REIT Series B Preferred Stock
As one of the larger issuers of nontraded preferred stock in the alternatives space, Bluerock has used the listed REIT, Bluerock Residential Growth REIT (NYSE: “BRG”) to issue Redeemable Preferred Stock and Warrants. The preferreds are electronically traded with a subscription process that is more streamlined, showing up on brokerage accounts on the settlement date. Because they are bought and delivered electronically, the cumbersome paperwork typical with other alternative investments has been largely eliminated. Even though at first glance we may think of these securities as illiquid, an investor can place a sales order with the CUSIP and a one-page form, and nothing prevents them from cashing out daily. The securities are not subject to the 5% liquidation thresholds typically present in most interval fund programs.
The sales of the non-listed preferred equity totaled over $117 million YTD through July 2019, reaching record sales in that month of over $22.3 million. One important factor in the success of Bluerock’s preferred issuances is the performance of BRG’s portfolio. Other sponsors have attempted to come into the retail space with preferred offerings, but they didn’t have portfolios that were performing well. So far, the BRG preferred stock’s warrants have delivered 15 tranches in the money, and its common stock has risen from $7.33 to over $12.00 per share since February 2018. The stock recently had a forward dividend yield of 5.28%.
As of June 30, 2019, BRG held investments in fifty real estate properties, consisting of thirty-five consolidated operating properties and fifteen properties through preferred equity or mezzanine loan investments. The fifty properties contain an aggregate of 15,251 multifamily units. As of June 30, 2019, the Company’s consolidated operating properties were approximately 94% occupied. For the six months ended June 30, 2019, the REIT had operating cash flow of $27.1 million and paid distributions totaling $31.7 million.
According to Josh Hoffman and Dustin Zachmeyer at Bluerock, the Company’s products offer lower volatility and can provide an inflation hedge. If and when the next recession occurs, certain real estate asset values will be more impacted. Regarding BRG, multifamily assets are likely to weather a downturn better than other types.
Bluerock Total Income+ Real Estate Fund
Bluerock’s flagship interval fund, the Bluerock Total Income+ Real Estate Fund (“TI+”), brought in more than $84 million in July, up 75% from the previous July, and is averaging over $4.3 million in daily inflows year to date through July.
TI+ is a public fund utilizing a multi-manager, multi-strategy, and multi-sector approach. The Fund allows individuals to invest in private, institutional real estate securities alongside some of the nation’s largest endowment and pension plans. The Fund is a continuously offered, non-diversified, closed-end management investment company that is operated as an interval fund. The Fund utilizes an exclusive partnership with Mercer Investment Management, Inc., the world’s leading advisor to endowments, pension funds, sovereign wealth funds and family offices globally, with over 3,300 clients worldwide, and over $11.6 trillion in assets under advisement.
Since inception in 2012, the Class A shares have an annualized total return through June 30, 2019, of 6.95% with the maximum sales charge and 7.90% without the maximum sales charge. In June 2019 the fund announced its 26th consecutive distribution at a 5.25% annualized rate. According to Jeffrey Schwaber, CEO of Bluerock Capital Markets, “TI+ has now paid total distributions of over $9.40 per share on its Class-A shares since inception (10.22.2012) in addition to its NAV growth of over 21%, demonstrating the Fund’s consistent income and growth in rising and falling interest rate environments.”
The interval fund has the flexibility to alter its underlying investment property types by changing its selection of institutional real estate securities in its portfolio to adjust to a downturn in the economy, according to Dustin Zachmeyer in a recent interview with Blue Vault.
Bluerock Value Exchange 1031
Bluerock Value Exchange’s (BVEX) DST offerings have recorded back-to-back record capital raise months of $19.3 million in June followed by nearly $20.8 million in July. Bluerock has structured 1031 Exchanges on over $750 million in total property value and nearly 6.0 million square feet of property. The Company’s 1031 exchange programs offer potential benefits that include attractive distribution rates, passive ownership, professional asset management with efficient and timely reporting, potential for tax deferral and long-term appreciation potential.
Bluerock Capital Markets
Since its founding in 2010, Bluerock Capital Markets, the managing broker dealer for Bluerock, has expanded its selection of alternative institutional investment products, with potential for growth, income and tax benefits, exclusively distributed through broker dealers and investment professionals. Bluerock Capital Markets ranked 4th among all active broker-dealers for capital fundraising in 2018 in the Direct Investments Industry, according to Stanger, Mountain Dell and Blue Vault, and so far in 2019 the firm is ranking third, behind Blackstone and Griffin Capital.
Bluerock’s Founder, Ramin Kamfar
Ramin Kamfar is the founder, Chairman and Chief Executive Officer of Bluerock Real Estate. He also serves as the Chairman, Chief Executive Officer and President of Bluerock Residential Growth and the Chairman of the Board of Trustees of Bluerock Total Income+ Real Estate Fund. Mr. Kamfar started his career as an investment banker at Lehman Brothers Inc., where he specialized in mergers and acquisitions. He left Lehman to focus on private equity investing. Over the following decade he executed a growth/consolidation strategy to build a startup into a leading public company in the ‘fast casual’ market later to be known as Einstein Noah Restaurant Group, Inc.
Mr. Kamfar received an M.B.A. degree with distinction in Finance from The Wharton School of the University of Pennsylvania, and a B.S. degree with distinction in Finance from the University of Maryland.
Sources: Bluerock, Blue Vault, SEC
